The cost for banks to borrow from each other, measured by the so-called seven-day repo rate, rose to 3.49% this week—a 19-month high—from 2.92% on Monday. The surge followed the People’s Bank of China’s withdrawal of a net 130 billion yuan ($18.85 billion) from China’s money markets over the four trading days until Tuesday this week, which has been partially reversed.

At the same time, the PBOC has been guiding major state-owned banks to restrict their short-term lending to other financial institutions, according to market participants.”